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Why You Need Health Insurance in the US
May. 1st, 2022 09:25 amYesterday I wrote about 5 kinds of people— other than "the poor"— who benefit from the Affordable Care Act, aka Obamacare. It brings affordable health insurance to nearly 36 million Americans. Some readers might wonder why, though, I sang the praises of this insurance program when just two days earlier I wrote Insurance Is A Racket, explaining that affluent people don't need insurance (*for items) and that I dislike being required to buy it. If I hate being required to buy insurance on the possessions in my house, shouldn't I object to being required to buy health insurance?
In a word, no.
They're actually different situations even though both are insurance.
When I wrote about why insurance is a "racket" I explained that the main benefit of insurance (*other than health insurance in the US) is access to a pool of money. Instead of having to save up, say, $100,000 in case you have a car accident before you buy a car, you pay, say, $150/month in insurance to cover you if/when a bad thing happens. That's actually a reasonable proposition... for people who don't have $100,000 in the bank. For those of us who do, it'd be more economical to "self insure"... except that we can't, because purchasing car insurance is required by law for those who wish to own and/or drive a car.
So, how is health insurance different from car insurance?
One of the really terrible things about health care in the US is the prices hospitals, clinics, doctors, etc. charge. Their "list prices", if you will, are absurd. There are plenty of articles out there in the news about patients being hit with a bill of, say, $33,000 for an appendectomy, only to see the price brought down to $3,500 when insurance agrees to pay for it.
Some affluent people point out that they can negotiate health care prices, too, without buying insurance. They'll point out, for example, how they got their dentist or their kids' pediatrician to lower the cost of standard office visits to $100, paying cash. That's great... in the limited circumstances where it works. The problem is it fails in too many circumstances.
I know this works, for example, with Hawk's physical therapist. One of our friends needed to to make PT appointments with him without insurance, paying 100% cash instead, and he quickly offered a fair rate. He's the business owner, so he can do that. And because it's a business with, like, 8 employees, and he's the lead hands-on practitioner, patients can talk to him to negotiate.
Why is the size of his business salient? Because more and more in recent years medical practices are being consolidated. As control of the practice isn't at the level of a doctor or two or three in a partnership, but at the level of a corporation employing dozens or even hundreds of doctors, the person who can cut the price 3x, 5x, 10x is not going to talk to you, an individual patient.
Take my primary care clinic as an example. Years ago it was a practice with two doctors, who were lifelong residents of the community. The total staff was maybe 8 people. You could talk to the boss, and he was inclined to help. Both doctors eventually retired, and the new doctor who bought the practice started growing it. Quickly she doubled the staff. Then quadrupled it. Reaching her became harder and harder, and generally when I did talk to her (not to negotiate prices, thankfully) she approached the conversations with a borderline hostile attitude that she was too busy managing a business to deal with the needs of individual patients anymore.
Since then, that doctor has sold the practice to a regional chain. They manage now dozens of clinics. Do you think you're going to reach the boss and negotiate a special price for yourself at a business of that size? And this is a small chain. Most of the clinics in the area are now part of enormous chains with hundreds if not thousands of staff and patients numbering over 100,000.
But what if you have an emergency? What if you're rushed to the hospital in an ambulance because blood is spurting out of your body, or one of your kids is unconscious. Forget about negotiating. And it's this emergency care that's often ridiculously expensive, like 10x higher as a starting price for self-styled negotiators, than what insurance companies have pre-negotiated across their millions of patients.
In a word, no.
They're actually different situations even though both are insurance.
Insurance is a Racket, Health Care is a Worse Racket
I'll explain the difference in technical terms in a moment. First let me explain it in casual terms for those who don't want to read the details. ...Actually I just explained it in the section header. 😅 As much as insurance is a racket, health care in the US is a worse racket.When I wrote about why insurance is a "racket" I explained that the main benefit of insurance (*other than health insurance in the US) is access to a pool of money. Instead of having to save up, say, $100,000 in case you have a car accident before you buy a car, you pay, say, $150/month in insurance to cover you if/when a bad thing happens. That's actually a reasonable proposition... for people who don't have $100,000 in the bank. For those of us who do, it'd be more economical to "self insure"... except that we can't, because purchasing car insurance is required by law for those who wish to own and/or drive a car.
So, how is health insurance different from car insurance?
Avoiding Absurd Prices
Health insurance has a second main benefit beyond access to a pool of money to pay for a big emergency. Insurance companies provide you access to negotiated prices.One of the really terrible things about health care in the US is the prices hospitals, clinics, doctors, etc. charge. Their "list prices", if you will, are absurd. There are plenty of articles out there in the news about patients being hit with a bill of, say, $33,000 for an appendectomy, only to see the price brought down to $3,500 when insurance agrees to pay for it.
Some affluent people point out that they can negotiate health care prices, too, without buying insurance. They'll point out, for example, how they got their dentist or their kids' pediatrician to lower the cost of standard office visits to $100, paying cash. That's great... in the limited circumstances where it works. The problem is it fails in too many circumstances.
Will They Negotiate with You?
The problems with the "I can negotiate for myself" approach are twofold. First, negotiating works only when you can reach a counterpart empowered to negotiate prices. If your doctor or dentist is running a small practice, s/he is a person you can talk to and come to an agreement with.I know this works, for example, with Hawk's physical therapist. One of our friends needed to to make PT appointments with him without insurance, paying 100% cash instead, and he quickly offered a fair rate. He's the business owner, so he can do that. And because it's a business with, like, 8 employees, and he's the lead hands-on practitioner, patients can talk to him to negotiate.
Why is the size of his business salient? Because more and more in recent years medical practices are being consolidated. As control of the practice isn't at the level of a doctor or two or three in a partnership, but at the level of a corporation employing dozens or even hundreds of doctors, the person who can cut the price 3x, 5x, 10x is not going to talk to you, an individual patient.
Take my primary care clinic as an example. Years ago it was a practice with two doctors, who were lifelong residents of the community. The total staff was maybe 8 people. You could talk to the boss, and he was inclined to help. Both doctors eventually retired, and the new doctor who bought the practice started growing it. Quickly she doubled the staff. Then quadrupled it. Reaching her became harder and harder, and generally when I did talk to her (not to negotiate prices, thankfully) she approached the conversations with a borderline hostile attitude that she was too busy managing a business to deal with the needs of individual patients anymore.
Since then, that doctor has sold the practice to a regional chain. They manage now dozens of clinics. Do you think you're going to reach the boss and negotiate a special price for yourself at a business of that size? And this is a small chain. Most of the clinics in the area are now part of enormous chains with hundreds if not thousands of staff and patients numbering over 100,000.
Can You Negotiate with a Broken Arm and Blood Squirting Out?
The second problem with the "I can negotiate for myself" idea is that it only works when you have time. If you're looking for basic wellness checkups, say, or scheduling an elective surgery, you might choose to spend hours or days calling around and negotiating for best prices.But what if you have an emergency? What if you're rushed to the hospital in an ambulance because blood is spurting out of your body, or one of your kids is unconscious. Forget about negotiating. And it's this emergency care that's often ridiculously expensive, like 10x higher as a starting price for self-styled negotiators, than what insurance companies have pre-negotiated across their millions of patients.
